NFO Review: Essel Equity Hybrid Fund

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Essel Equity Hybrid Fund is a new fund offer (NFO) from Essel Mutual Fund. Essel MF came into existence in 2016 when Essel Finance bought out Peerless Mutual Fund. Essel Finance is part of the larger Essel Group led by Subhash Chandra. Other major group brands include Zee Entertainment and Essel Propack.

The mutual fund had an AUM (Assets under Management) of Rs 1,146 crore at the end of December 2017, spread across 60 schemes. The fund’s AUM is quite small. In comparison, HDFC Mutual Fund’s AUM is Rs 2.89 lakh crore.

Essel Hybrid fund is an open-ended fund. This means you can enter and exit the fund even after the NFO period. The scheme will invest between 65% and 80% of its corpus in equity and derivatives. It will invest between 20 and 35% of its corpus in debt. It will invest between 0 to 10% of its corpus in units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InVITs). This allocation means that it will be classified as an equity fund for tax purposes.

Its benchmark will be the Crisil Hybrid 35+65 Index. This index is a combination of the S&P BSE 200 (35%) and Crisil Composite Bond Index (65%). The scheme imposes an exit load in case of redemption of more than 15% of your units within 365 days of purchase. There is no exit load after that. It offers growth, dividend reinvestment and dividend payout options.

The scheme will have two fund managers. Viral Berawala, the Chief Investment Officer (CIO) of Essel Mutual Fund, will manage the equity component of the scheme. He earlier held this position at Reliance Nippon Mutual Fund and was an assistant fund manager at Reliance Nippon Mutual Fund. Killol Pandya, who manages several other debt schemes of Essel Mutual Fund, will manage the debt component. He was earlier a debt fund manager with LIC Nomura Mutual Fund.

Performance of Essel Funds

The table below gives the performance of Essel Mutual Fund schemes over the past three years. Almost all of them have underperformed their benchmarks. However note that the fund management changed in 2016 and it takes some time for new management to put its systems and ideas into place. As a result these figures may not be very reflective of the fund house as it stands today.

Fund

Type

3 year Fund Performance %

Benchmark Performance %

Essel Large Cap Equity Fund

Equity Large Cap

9.03

7.38

Essel Large and Midcap Fund

Equity Multicap

5.47*

12.49*

Essel Long Term Advantage

Equity Taxsaver

5.19*

12.12*

Essel 3 in 1 fund

Hybrid

6.15

8.02

Essel Regular Savings Fund

Debt

6.43

8.42

Essel Flexible Income Fund

Debt

5.90

8.12

Essel Short Term Fund

Debt

6.67

7.90

Essel Ultra Short Term Fund

Debt

7.06

7.33

Essel Liquid Fund

Debt

7.49

7.33

*One year returns. Source: Essel Mutual Fund Factsheet, March 2018. Data as on 31st March 2018.

RupeeIQ Take

Typically one should invest in mutual funds with an established track record. The fund house is new in its Essel avatar. As for Essel Hybrid Fund, it is an open-ended fund and so there is little advantage to be gained from investing during the NFO period. Unlike stocks, there are no ‘listing gains’ or allotment benefits on equity mutual funds.